Read Books Online and Download eBooks, EPub, PDF, Mobi, Kindle, Text Full Free.
Optimal Portfolio Choice Under Loss Aversion
Download Optimal Portfolio Choice Under Loss Aversion full books in PDF, epub, and Kindle. Read online Optimal Portfolio Choice Under Loss Aversion ebook anywhere anytime directly on your device. Fast Download speed and no annoying ads. We cannot guarantee that every ebooks is available!
Book Synopsis Optimal Portfolio Choice Under Loss Aversion by : Arjan B. Berkelaar
Download or read book Optimal Portfolio Choice Under Loss Aversion written by Arjan B. Berkelaar and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the optimal investment strategy for loss averse investors, assuming a complete market and general Ito processes for the asset prices. The loss-averse investor follows a partial portfolio insurance strategy. When the investor's planning horizon is short (less than 5 years), he or she considerably reduces the initial portfolio weight of stocks compared to an investor with smooth power utility. The empirical section of the paper estimates the level of loss aversion implied by historical U.S. stock market data, using a representative agent model. We find that loss aversion and risk aversion cannot be disentangled empirically.
Book Synopsis Optimal Portfolio Choice Under Loss Aversion by : Arjan Berkelaar
Download or read book Optimal Portfolio Choice Under Loss Aversion written by Arjan Berkelaar and published by . This book was released on 2000 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Optimal Consumption and Portfolio Choice with Loss Aversion by : Giuliano Curatola
Download or read book Optimal Consumption and Portfolio Choice with Loss Aversion written by Giuliano Curatola and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Multiperiod Portfolio Choice Under Loss Aversion with Dynamic Reference Point in Serially Correlated Market by : Jianjun Gao
Download or read book Multiperiod Portfolio Choice Under Loss Aversion with Dynamic Reference Point in Serially Correlated Market written by Jianjun Gao and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we investigate a novel multiperiod portfolio decision model for loss-averse investors with dynamically adapted reference points in a market with serially correlated returns. We demonstrate that the optimal policy is a piecewise linear function of the deviation between current wealth and reference level, and its slopes are a path-dependent function of the historical returns, in sharp contrast to the constant slopes generated by the simplified model that ignores the diminishing sensitivity and assumes independent returns. We show that this new feature significantly changes the typical V-shape pattern of the risky position, resulting in a more complicated nonlinear functional mapping. Our research highlights the potential dangers of relying on the simplified model and provides valuable insights for investors and practitioners to develop effective portfolio strategies under realistic market conditions. Additionally, our simulation analysis indicates that the predictability of returns combined with a small degree of diminishing sensitivity may enhance the disposition effect. Lastly, we prove that the new policy also fits to solve the multiperiod mean-Conditional-Value-at-Risk (CVaR) portfolio optimization problem with correlated returns, further broadening the application of our findings.
Book Synopsis Consumption and Portfolio Choice Under Loss Aversion and Endogenous Updating of the Reference Level by : Servaas van Bilsen
Download or read book Consumption and Portfolio Choice Under Loss Aversion and Endogenous Updating of the Reference Level written by Servaas van Bilsen and published by . This book was released on 2017 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: We explicitly derive and explore the optimal consumption and portfolio policies of a loss- averse individual who endogenously updates his reference level over time. We find that he protects his current consumption by delaying painful reductions in consumption after a drop in wealth, and increasingly so with higher degrees of endogeneity. The incentive to protect current consumption is stronger with a medium wealth level than with a high or low wealth level. Furthermore, this individual adopts a conservative investment strategy in normal states and typically a more aggressive strategy in good and bad states. Endogeneity of the reference level increases overall risk-taking and generates an incentive to reduce risk exposure with age even without human capital. The welfare loss that this individual would suffer under the conventional CRRA consumption and portfolio policies typically exceeds 10%.
Book Synopsis Strategic Asset Allocation by : John Y. Campbell
Download or read book Strategic Asset Allocation written by John Y. Campbell and published by OUP Oxford. This book was released on 2002-01-03 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt: Academic finance has had a remarkable impact on many financial services. Yet long-term investors have received curiously little guidance from academic financial economists. Mean-variance analysis, developed almost fifty years ago, has provided a basic paradigm for portfolio choice. This approach usefully emphasizes the ability of diversification to reduce risk, but it ignores several critically important factors. Most notably, the analysis is static; it assumes that investors care only about risks to wealth one period ahead. However, many investors—-both individuals and institutions such as charitable foundations or universities—-seek to finance a stream of consumption over a long lifetime. In addition, mean-variance analysis treats financial wealth in isolation from income. Long-term investors typically receive a stream of income and use it, along with financial wealth, to support their consumption. At the theoretical level, it is well understood that the solution to a long-term portfolio choice problem can be very different from the solution to a short-term problem. Long-term investors care about intertemporal shocks to investment opportunities and labor income as well as shocks to wealth itself, and they may use financial assets to hedge their intertemporal risks. This should be important in practice because there is a great deal of empirical evidence that investment opportunities—-both interest rates and risk premia on bonds and stocks—-vary through time. Yet this insight has had little influence on investment practice because it is hard to solve for optimal portfolios in intertemporal models. This book seeks to develop the intertemporal approach into an empirical paradigm that can compete with the standard mean-variance analysis. The book shows that long-term inflation-indexed bonds are the riskless asset for long-term investors, it explains the conditions under which stocks are safer assets for long-term than for short-term investors, and it shows how labor income influences portfolio choice. These results shed new light on the rules of thumb used by financial planners. The book explains recent advances in both analytical and numerical methods, and shows how they can be used to understand the portfolio choice problems of long-term investors.
Book Synopsis Ambiguity and Optimal Portfolio Choice with Value-at-Risk Constraint by : Bong-Gyu Jang
Download or read book Ambiguity and Optimal Portfolio Choice with Value-at-Risk Constraint written by Bong-Gyu Jang and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Integrating a Value-at-Risk constraint on a fund manager's wealth and ambiguity, we present a model of optimal portfolio choice for a fund manager who allocates her wealth between risky and riskless assets. When a fund manager controls asset composition, her reactions di er with respect to an increase in only risk aversion and only ambiguity aversion. When the sum of coe cients of risk aversion and ambiguity aversion is fixed, the effect of risk aversion on risky investment dominates the effect of ambiguity aversion in that stock holdings are dramatically smaller in the absence of ambiguity aversion than in its presence.
Book Synopsis Why Stocks May Disappoint by : Andrew Ang
Download or read book Why Stocks May Disappoint written by Andrew Ang and published by . This book was released on 2011 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recently much progress has been made in developing optimal portfolio choice models accomodating time-varying opportunity sets, but unless investors are unreasonably risk averse, optimal holdings include unreasonably large equity positions. One reason is that most studies assume investors behave as expected utility maximizers with power utility. In this article, we provide a formal treatment of both static and dynamic portfolio choice using the Disappointment Aversion preferences of Gul (1991). While different from the Kahneman-Tversky (1979) loss aversion utility, these preferences imply asymmetric aversion to gains versus losses and are consistent with the tendency of some people to like lottery-type gambles but dislike stock investments. By calibrating a number of data generating processes to actual US data on stock and bond returns, we find very reasonable portfolios for moderately disappointment averse investors with utility functions exhibiting low curvature. Disappointment aversion preferences affect intertemporal hedging demands and the state dependence of asset allocation in such a way as to not be replicable by standard expected utility functions with higher curvature. Furthermore, it is easy to reconcile the large equity premium observed in the data with disappointment aversion utility of low curvature and reasonable disappointment.
Book Synopsis Portfolio Choice with Loss Aversion, Asymmetric Risk-taking Behavior and Segregation of Riskless Opportunities by : Martin Vlcek
Download or read book Portfolio Choice with Loss Aversion, Asymmetric Risk-taking Behavior and Segregation of Riskless Opportunities written by Martin Vlcek and published by . This book was released on 2006 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Study of Behavioral Factors in Optimal Portfolio Selection by : Dr.Hossein Parsian
Download or read book The Study of Behavioral Factors in Optimal Portfolio Selection written by Dr.Hossein Parsian and published by . This book was released on 2015 with total page 8 pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this study is specifying the role of behavioral finance in optimal portfolio selection. In this research accepted companies in Tehran Stock Exchange have been considered for 5 year period (from 2009 to 2013) and by examining 106 companies and using regression and analysis of variance techniques, the effect of behavioral factors in forms of mental accounting and loss aversion in investment stock on selecting the optimal portfolio with high efficiency is compared to standard finance. This research includes one main hypothesis and two sub hypotheses. According to this research the expected return of selected portfolio in behavioral model with an emphasis on mental accounting and loss aversion (as indicators of behavioral factors) has greater return than the standard model, so the result of research confirmed these hypotheses.
Book Synopsis Portfolio Choice, Liquidity Constraints and Stock Market Mean Reversion by : Alex Michaelides
Download or read book Portfolio Choice, Liquidity Constraints and Stock Market Mean Reversion written by Alex Michaelides and published by . This book was released on 2001 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Essays on Uncertainty, Beliefs Updating and Portfolio Choice by : Kouamé Marius Sossou
Download or read book Essays on Uncertainty, Beliefs Updating and Portfolio Choice written by Kouamé Marius Sossou and published by . This book was released on 2019 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: This Thesis, consisting of three chapters, studies the effects of uncertainty on decision-making with portfolio choice applications. Chapter 1 studies how experimental subjects report subjective probability distributions in the presence of ambiguity characterized by uncertainty over a fixed set of possible probability distributions generating future outcomes. The level of distribution uncertainty varies according to the observed outcomes and the rules used by the subjects to update the distribution uncertainty. This chapter introduces several reporting and updating rules and our empirical analysis focuses on estimating the sample distribution of these rules. Two dominant reporting rules emerge from our analysis: we find that 65% of subjects report distributions by properly weighting the possible distributions using their expressed uncertainty, while 22% of subjects report distributions close to the distribution they perceive as most likely. Further, we find significant heterogeneity in how subjects update their expressed uncertainty. On average, subjects tend to overweight the importance of their prior uncertainty relative to new information, leading to ambiguity that is substantially more persistent than would be predicted using Bayes' rule. Counterfactual simulations suggest that this persistence will likely hold in settings not covered by our experiment. Uncertainty in financial markets is a natural consequence of investors being unaware of objective probabilities of asset returns. Chapter 2 highlights that ambiguity and loss aversion have opposite effects on financial markets and can coexist in the presence of uncertainty. This chapter addresses the normative question of the optimal portfolio evaluation frequency for an investor in order to minimize the effect of myopia, but to learn about the investment opportunities in the market. Towards this end, we present a new experimental design in which investors are asked to make repeated portfolio choices facing initial ambiguity concerning the distribution of returns of one of the available assets. We exploit exogenous variations in evaluation frequency along with time variation of probabilistic beliefs over the possible return distributions to jointly identify ambiguity, loss, and risk aversion along with rules investors use to update their ambiguity. Estimates from a structural model suggest seven different classes of investors. Investor class membership depends on loss aversion, ambiguity aversion as well as risk aversion preferences. Further, we find that at the aggregated level, investors are loss averse, ambiguity averse and they display risk aversion over gains and risk seeking over losses. We conclude our analysis by using our model estimates to predict the distribution of optimal evaluation periods for our sample. Our predictions suggest that approximatively 70% of investors prefer the highest possible evaluation period frequency. Finally, Chapter 3 investigates whether or not the discount factor of the elderly affects their portfolio choices. We estimate time preferences using inter-temporal choice data from a hypothetical experiment in a representative sample of American elders and a structural model of decision-making accounting for lifetime uncertainty. Our results indicate considerable heterogeneity in the elderly population. Moreover, we find that older people who display a higher discount factor are more likely to own retirement accounts and risky assets. These older people also tend to decrease the share of financial wealth held in safe assets and increase the share of financial wealth held in risky assets. These findings suggest that time preferences affect investment choices from safe assets toward other financial assets, all else being equal.
Book Synopsis Asymmetries and Portfolio Choice by : Magnus Dahlquist
Download or read book Asymmetries and Portfolio Choice written by Magnus Dahlquist and published by . This book was released on 2015 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the portfolio choice of an investor with generalized disappointment aversion preferences who faces returns described by a normal-exponential model. We derive a three-fund separation strategy: the investor allocates wealth to a risk-free asset, a standard mean-variance efficient fund, and an additional fund reflecting return asymmetries. The optimal portfolio is characterized by the investor's endogenous effective risk aversion and implicit asymmetry aversion. We find that disappointment aversion is associated with much larger asymmetry aversion than are standard preferences. Our model explains patterns in popular portfolio advice and provides a reason for shifting from bonds to stocks as the investment horizon increases.
Book Synopsis Uncertainty aversion, risk aversion and the optimal choice of portfolio by : James Dow
Download or read book Uncertainty aversion, risk aversion and the optimal choice of portfolio written by James Dow and published by . This book was released on 1990 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Discrete-Time Behavioral Portfolio Selection Under Prospect Theory by : Yun Shi
Download or read book Discrete-Time Behavioral Portfolio Selection Under Prospect Theory written by Yun Shi and published by . This book was released on 2014 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: We formulate and study a general multi-period behavioral portfolio selection model under Kahneman and Tversky's prospect theory, featuring an incomplete market and an S-shaped utility function. We first discuss the ill-posedness issue under a multi-period framework and identify the conditions for the well-posedness under which infinitely leveraging an asset is not optimal for the investor. Moreover, we show that the well-posedness of the multi-period portfolio selection problem can be characterized in terms of an induced loss-aversion measure, which is an increasing function of time. Under the conditions for well-posedness, we solve the multi-period behavioral portfolio selection problem completely by deriving its semi-analytical optimal policy. In particular, we identify two cases: the case with one risky asset and the case with multiple risky assets that are jointly elliptically distributed, under which the optimal behavioral portfolio policy takes a piecewise linear feedback form. For the multiple risky assets case, we further demonstrate that the two-fund separation is still valid under the S-shaped utility. We also discuss the implications of our findings to the well documented phenomena of non-participation effect and horizon effect.
Book Synopsis Handbook of the Fundamentals of Financial Decision Making by : Leonard C. MacLean
Download or read book Handbook of the Fundamentals of Financial Decision Making written by Leonard C. MacLean and published by World Scientific. This book was released on 2013 with total page 941 pages. Available in PDF, EPUB and Kindle. Book excerpt: This handbook in two parts covers key topics of the theory of financial decision making. Some of the papers discuss real applications or case studies as well. There are a number of new papers that have never been published before especially in Part II.Part I is concerned with Decision Making Under Uncertainty. This includes subsections on Arbitrage, Utility Theory, Risk Aversion and Static Portfolio Theory, and Stochastic Dominance. Part II is concerned with Dynamic Modeling that is the transition for static decision making to multiperiod decision making. The analysis starts with Risk Measures and then discusses Dynamic Portfolio Theory, Tactical Asset Allocation and Asset-Liability Management Using Utility and Goal Based Consumption-Investment Decision Models.A comprehensive set of problems both computational and review and mind expanding with many unsolved problems are in an accompanying problems book. The handbook plus the book of problems form a very strong set of materials for PhD and Masters courses both as the main or as supplementary text in finance theory, financial decision making and portfolio theory. For researchers, it is a valuable resource being an up to date treatment of topics in the classic books on these topics by Johnathan Ingersoll in 1988, and William Ziemba and Raymond Vickson in 1975 (updated 2 nd edition published in 2006).
Book Synopsis Portfolio selection using behavioral models by : Andrea Gheno
Download or read book Portfolio selection using behavioral models written by Andrea Gheno and published by Roma TrE-Press. This book was released on 2023-10-16 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: Nell'ambito dei problemi di scelta in condizioni di rischio introduciamo un nuovo modello comportamentale e implementiamo un'analisi empirica basata sul confronto con il classico approccio della Teoria del Prospetto. L'applicazione di questi modelli è validata nella selezione di portafoglio attraverso tre modelli di portafoglio tradizionali utilizzati come riferimento (portafoglio a varianza minima, portafoglio a deviazione mediana assoluta e portafoglio equamente ponderato). L'obiettivo di questo lavoro di ricerca è quello di incorporare la percezione del rischio degli investitori nelle scelte dei portafogli ottimali. Proponiamo un'analisi out-of-sample di quattro indici azionari per dimostrare la superiorità dei modelli comportamentali di selezione di portafoglio rispetto a quelli tradizionali. DOI: 10.13134/979-12-5977-249-7
